Alphabet Stock Slides as Samsung Weighs Replacing Google Search With AI-Backed Bing

Alphabet shares dropped more than 3% in early trading Monday after reports surfaced that Samsung is considering replacing Google as the default search engine on its smartphones and tablets with Microsoft’s Bing. The potential shift threatens one of the most lucrative distribution agreements in the technology industry and signals that artificial intelligence integration is beginning to alter the competitive dynamics of a market Google has controlled for two decades.

Internal messages and documents reviewed by the New York Times indicate the prospect of losing Samsung’s default placement triggered alarm among Google employees last month. Samsung, the world’s largest smartphone manufacturer by volume, ships hundreds of millions of Android devices annually. Because Android is an open-source operating system, device manufacturers retain the ability to swap pre-installed applications, making default search contracts highly contested territory. Losing Samsung would not only reduce direct query volume but could weaken Google’s leverage in negotiating similar default placements with other hardware partners.

The financial stakes extend beyond organic traffic. Alphabet generated over $160 billion from advertising in 2022, with the vast majority flowing through its search business. Default search agreements are a primary driver of that revenue stream. While the exact terms of the Samsung arrangement remain undisclosed, comparable deals illustrate the scale involved: court filings from the U.S. Department of Justice’s antitrust trial against Google revealed the company pays Apple tens of billions of dollars annually to remain the default search engine on Safari across iPhones and Macs.

Microsoft has aggressively positioned Bing to capitalize on the generative AI wave by embedding OpenAI’s large language models directly into the search experience. Unlike traditional search engines that return lists of hyperlinks, the updated Bing provides synthesized, conversational answers alongside standard results. This architectural shift appeals to hardware manufacturers looking to differentiate their devices with advanced AI capabilities out of the box, rather than relying solely on legacy search infrastructure.

To counter the encroachment, Google is accelerating development of a redesigned search platform internally referred to as Project Magi. Approximately 160 employees are assigned to the initiative, which aims to fundamentally change how search results are structured and displayed. The project includes a dedicated AI chat tool designed to answer complex queries conversationally. Reports suggest the company plans to introduce elements of the new architecture publicly next month.

Google spokesperson Lara Levin stated the company has utilized artificial intelligence for years to refine result quality, pointing to features like multisearch, which allows users to combine text and images in a single query. “Not every brainstorm deck or product idea leads to a launch, but as we’ve said before, we’re excited about bringing new AI-powered features to Search, and will share more details soon,” Levin said.

The urgency behind Project Magi follows a turbulent few months for the tech giant. In February, a promotional video for Bard, Google’s standalone AI chatbot, contained a factual error regarding the James Webb Space Telescope. Alphabet’s stock fell 7.7% following the presentation, erasing roughly $100 billion in market capitalization in a single session. Microsoft also faced scrutiny when early demonstrations of its Bing chatbot produced inaccurate product information and exhibited unpredictable behavior during extended conversations.

These missteps underscore the inherent risk of integrating probabilistic AI models into search engines, where users expect deterministic accuracy. Large language models generate text based on statistical patterns rather than verified databases, leading to instances where the software confidently presents fabricated information—a phenomenon widely known in the industry as hallucination.

During a 60 Minutes interview broadcast Sunday, Alphabet CEO Sundar Pichai addressed the broader transition, emphasizing the necessity of deploying these systems carefully. He noted the company is prioritizing user feedback and building robust safety layers before releasing more capable models at scale. Pichai characterized generative AI as a foundational shift that will eventually impact every product across every company, adding that the industry remains in the early stages of the technology’s development.

Bard began rolling out to general users in March, positioning itself as a competitor to OpenAI’s ChatGPT by offering assistance with drafting documents, planning events, and generating ideas. However, Bard currently operates as a separate destination rather than being fully integrated into the core search interface, leaving a gap that Microsoft has moved quickly to exploit within Bing.

The race to redefine search now involves a widening field of competitors. Meta, Baidu, IBM, and numerous venture-backed startups are developing proprietary AI tools, increasing pressure on established players to ship functional products rapidly. Alphabet closed trading Friday ahead of the weekend; Monday’s early sell-off reflects the market’s immediate reassessment of Google’s defensive moat around its core search monopoly.